Homebuilders are poised for a strong next few months if recent history is any guide, based on data published last week by the U.S. Census Bureau and the Department of Housing and Urban Development.
Fall months in recent years have yielded higher home prices and less time on market for new homes than the rest of the year, with last September and October setting records in both categories.
As September approaches, 2023 is already showing tighter housing inventory for new homes and boasting more new home sales than 2022, which could bode well for homebuilders.
Quick sales
New homes typically lasted on the market for just a month and a half in September and October last year, based on the median values. That brief duration was the lowest median time on market since the measure was first recorded in 1975.
So far this year, the median time on market for new homes has been lower every month than the respective period in 2022, including July’s median of 2.3 months on market.
Rising prices
The median sales price for new homes has trended higher in each of the last two fall seasons and is trending upward already in 2023.
Last October, the median price reached $496,800, the highest in recorded history going back to 1963. However, this year’s prices have come in below their respective 2022 months since April.
More new home sales
Unlike the median sales price and median months on market, new home sales tend to dip in the fall, at least in recent years. But 2023 sales have significantly outpaced 2022 levels in recent months.
July tallied 59,000 new home sales, 34.1% more than in the same month in 2022. That total imputed a seasonally adjusted annual rate of new home sales of 714,000, up 31.5% year over year.
Tighter inventory
July was the first month so far this year in which the count of single-family new home starts was higher than the 2022 count. New homes on the market, meanwhile, have been below 2022 levels since April.
Months of supply — the number of months existing new home inventories would last without new supply — has likewise been below 2022 levels since April.
More sales for work started or completed
Homebuilders have worked frenetically since the early months of the pandemic.
The number of new single-family homes for sale fell more than 15% from March to October 2020, but then underwent an almost unbroken two-year streak of increases. This number reached 466,000 homes in October 2022, a 65.8% increase from two years prior.
That pace has moderated but has still remained above 425,000 new single-family homes for sale since then.
Buyers seem to be rewarding the effort, with the percentage of home sales accounted for by homes that have not started construction shrinking from 32% to 13% since January 2021, although that could simply be a function of the increase in new homes that are under construction or completed.
Beyond the trends
Of course, the past is never a perfect predictor of the future, and some homebuilders are skeptical that recent trends will continue. Homebuilder confidence declined for the first time this year in August.
In an effort to keep sales coming, some homebuilders are building smaller, more affordable homes, although some are skeptical that will overcome the headwinds of high mortgage rates.
However, new home sales are helped by even tighter inventories of existing homes, as recent mortgage application data show, and by a sticky housing shortage.
